H&M’s group net sales in the first quarter ended on 29 February 2024 reached SEK 53.7bn ($5bn), a 2% decrease compared to last year.
Associate apparel analyst at GlobalData Alice Price said Eastern Europe represented H&M's more “resilient region” in terms of revenue growth, rising 8% in local currencies. She attributed this to the retailer's choice to reopen stores in Ukraine, starting in November 2023.
Portfolio brands including COS, Monki, Weekday, Afound & Other Stories and Arket performed better than the flagship H&M, with sales up 8% in local currencies in the first quarters.
Price believes H&M’s namesake brand's “lacklustre” product offerings are holding the retailer back from hitting topline growth.
Sales in North and South America took the biggest hit with a 6% decrease to SEK 12.8m, followed by Asia, Oceania and Africa which declined by 4% to SEK7.6m, the Nordics dropped by 3% to SEK4.7m and lastly, Western Europe saw a 1% decline to SEK17.1m.
New CEO tackles Shein competition
These are the first results presented under new CEO Daniel Ervér, who took the reins in a surprise move announced on 31 January after former CEO Helena Helmersson left, stating that the role had been “very demanding at times.”
Ervér took into account what he described as the “challenging situation” where consumers are battling inflation and high-interest rates.
“In this situation, our customer offering is more relevant than ever,” Ervér said.
Price added that H&M’s new CEO has outlined a strategy aimed at responding more swiftly to trends to rival Shein, while also venturing into higher-priced items to challenge its main competitor, the Inditex-owned Zara.
However, Price warned that Ervér must ensure his strategy does not get too confusing as this could risk H&M becoming a "jack of all trades and a master of none."
Improving sales in February 2024
H&M's Q1 sales gradually improved during February with a well-received Spring collection, which the company saw as a positive sign of it being on the “right track.”
Ervér highlighted that achieving a 10% operating margin in 2024 remains the company's foremost objective. H&M is progressing towards this goal by improving sales, cutting costs and managing inventory.
“Development continued in the right direction in the first quarter with an improved gross margin and operating profit, lower inventory and strong cash flow,” said Ervér.
“Through continued cost control, better precision in our collections and close cooperation with our suppliers, we now stand better equipped. We are fully focused on driving profitable growth going forward. Our stronger gross margin enables us to enhance the customer offering further and provide more value for money through improved quality and better prices,” Ervér added.
To improve the in-store experience, H&M said it is refurbishing around 250 stores this year, a "significant increase" compared to last year. It also plans to open around 100 new stores, mainly in growth markets, and close 160 stores in more established markets.
Ervér mentioned other ways the company is continuing to “simplify” the organisation to make it efficient and faster, including increased nearshoring and enhanced efforts in digitalisation and AI, “enabling customers to access the most relevant fashion each time they meet with us,” he added.
Key results from H&M Q1:
- Net sales net sales amounted to SEK 53.7m
- Operating profit totaled SEK 2.1bn
- Gross profit increased by 7% to SEK 27.7m
The Swedish retailer also published its annual and sustainability report for 2023. Among other things, the report shows a 22% reduction in greenhouse gas emissions in 2023, a 29% reduction in electricity intensity and 85% of all materials were recycled or sustainably sourced in 2023.
In March 2024, H&M and global investor Vargas Holding partnered to introduce Syre, a venture aimed at spearheading the decarbonisation and wastage reduction of the textile industry through large-scale textile-to-textile recycling, starting with polyester.
